Social Media Marketing and Consumer Retail: It’s About More Than Ads

Is social media for marketing and business a significant driver of retail sales or an overhyped “rounding error” that can be ignored? Crazy as that question may sound, given a couple of recent studies and cases, you’d be excused for not knowing which is correct.

When Walmart CEO Mike Duke explained the program to Walmart’s business partners, this line stood out: “In this age of social networks and instant information, consumers increasingly expect more transparency on the products they buy. Today, there is no trust without transparency.”

Go back to my opening question and ask yourself: Is social media a factor in business, or is it a mathematical rounding error with minimal impact on sales? Look at the commitment that Walmart is making. Given the firm’s attention to quantitatively defining a projected, measurable business value (ROI) for any effort it undertakes, it’s clear that Walmart believes there is a strong connection. Disclosure: I agree.

Compare Walmart’s commitment to social media as a factor in retail business growth with these findings from a 2011 study from Forrester and GSI Commerce. Described in the Mashable article, “Social Media Has Little Impact on Online Retail Purchases,” the study finds that “social media rarely leads directly to purchases online.” So, which is it: effective tool or weak purchase factor?

As with any use of a term that has become as overused as “social media,” one must look into the details to understand what is actually at the core of the various statements and efforts. Regarding the study, here’s an important insight into what was measured: “Data (in the study) indicates that less than 2% of orders were the result of shoppers coming from a social network.” In other words, far from “social media rarely leading to purchase…” (which is another matter altogether), the study looked at the number of people who, for example, clicked on a display ad in Facebook and went directly to a commerce site and bought something. Obviously, there is more to social media marketing than that.

How Social Media Can Be Good for Business

Examined in such a limited – and frankly misguided – application of social meda, it’s really no surprise at all. Most people don’t go to social networks to go shopping; they go to socialize. GSI Commerce EVP Fiona Dias affirms this: “Buying things from retailers is maybe 10th on the list of things they want to do on Facebook.” Using Facebook as a TV channel, running ads, and hoping people will go shopping is probably not the best application of social media. Yes, it may have some impact, and sure, it’s probably a reasonable base to cover in your overall campaign. But expecting ads on social networks to carry the day is probably a losing proposition.

What works? Back to Walmart. What Walmart – and other smart retailers from Starbucks to Wet Seal to Amazon are doing – is building social interaction and consumer collaboration into the retail process. Levi’s created its “Friends Store” to leverage the social aspects of retail shopping. Here’s the big insight: social media is not just another broadcast channel. In fact, as broadcast channels go, it’s not a particularly good one, as the GSI-Forrester study makes clear. Instead, social media offers a way to engage, participate, learn from, and share ideas with customers. Through these transparent actions, trust is developed, and we’re now back to the Walmart CEO’s observation: “There is no trust without transparency.”

Unlike display ads, collaborating, sharing, and establishing trust goes a long way in improving the likelihood of sales conversions. Moreover, with applications like The Good Guide and Google Goggles – mobile apps that allow consumers to access data beyond price and availability – are changing the way markets operate. Google Goggles will quickly find reviews and recommendations by simply scanning the product label – or, failing that, a barcode or QR code – so that consumers can confidently choose between competing purchases while in your store, rather than feeling vulnerable and therefore completing the purchase online at home. The Good Guide takes it one step further, returning among other things hiring policies and environmental data for the manufacturer of an item under consideration. Now Walmart’s strategy of working with suppliers and partners to improve on these fronts makes even more (business ) sense: when a consumer chooses to support those brands with the smallest carbon footprints, they’ll be able to evaluate competing brands on that basis right from the aisle, inside Walmart.

Social Media and B2B

If the visible side of retail – B2C – is picking up on the application of social and collaborative technology as business drivers, what about the “invisible” B2B applications? Lots going on here, too. From Socialtext’s internal collaboration solutions to IBM’s Smarter Commerce initiative, retailers, suppliers, partners, and others, companies are using social channels in ways that boost business. Socialtext connect teams, and IBM’s Smarter Commerce enables businesses to respond more quickly to changing customer needs.

Commercial real estate firms that specialize in consumer retail are picking up on this too. Consider Boston-based Linear Retail, which added a smartly-integrated social platform to its business and marketing efforts. Built around existing social tools and platforms, it places its customers front and center as advocates in the firm’s marketing programs. The direct beneficiaries are Linear’s business customers, and by extension Linear Retail itself.

Riddle solved. Social media can be highly effective when used to drive trust through transparent, accountable activities based on the needs of customers. Customers’ needs can be ascertained through social media as well, using tools like Communispace or the Force Ideas platforms. What does this mean for you? Rather than viewing the social web as a TV channel and limiting your activity to advertising, develop a broader-reaching collaborative program that pulls suppliers and customers inside your business. Transparency and participation build trust, and trust builds advocates. The businesses that do the best job of building vocal advocates will emerge as the winners in their markets.

Dave Evans is vice president of social strategy at Lithium Technologies and a contributor to ClickZ.

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